Milacron (NYSE:MZ)
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Milacron Inc. (NYSE: MZ), a leading global supplier of
plastics-processing technologies and industrial fluids, reported a net
loss of $6.9 million, or $1.76 per diluted share, in the first quarter
ended March 31. The loss included $0.6 million in restructuring charges
with no tax benefit. This compared to a net loss in the first quarter of
2007 of $10.8 million, or $2.68 per share, which included $2.4 million
in restructuring charges.
Boosted by operating efficiencies from restructuring and other
cost-cutting measures, first quarter manufacturing margins rose to 19.0%
from 18.7% a year ago. As a result, Milacron generated positive
operating earnings of $1.5 million as opposed to an operating loss of
$2.0 million in the first quarter of last year.
Sales in the quarter were $203 million, up from $190 million. The
increase was due almost entirely to favorable currency translation
effects, primarily the weakening of the dollar vis-à-vis
the euro and other currencies. New orders in the quarter were also $203
million, and the backlog of $134 million remained at a healthy level.
Net cash used by operations during the quarter was $19.1 million, up
from $6.7 million a year ago. The change was primarily the result of an
increase in receivables due to the termination of an off-balance sheet
receivable sale facility during the quarter. The company’s
newly signed €27 million credit
agreement with Lloyds TSB Group plc, which became fully operational in
the second quarter, should reverse the majority of the effect on net
cash over the course of the year.
At the end of the quarter, cash on hand was $37 million, $2 million
higher than a year ago, and Milacron had approximately $50 million
available for borrowing under its North American revolving credit
facility, compared to $38 million last year. The increase in liquidity
was, in great part, made possible by the Lloyds credit program, which
allowed the company to repatriate $20 million in the quarter.
“We continue to make solid progress in
reducing our product costs as well as our overall cost structure,”
said Ronald D. Brown, chairman, president and chief executive officer. “The
results of these efforts are showing up in improved manufacturing
margins and operating earnings, despite difficult market conditions,
particularly in the U.S. We are also seeing the benefits of our
initiatives to grow our presence in markets outside the U.S. Our sales
to non-U.S. markets grew another 12% in the quarter and now account for
half of our total.”
Segment Results
Machinery Technologies-North America (machinery and related
parts and services for injection molding, blow molding and extrusion
supplied from North America, India and China) Continued gains in
India and China offset weak demand in North America, as sales of $92
million were essentially flat with those of the same period last year.
New orders fell to $94 million from $98 million a year ago, reflecting
continued weakness in the automotive and construction sectors. Segment
earnings increased to $2.8 million from $1.8 million, reflecting savings
from restructuring measures implemented in 2007. The segment is expected
to show further improvement in profitability as the year progresses.
Machinery Technologies-Europe (machinery and related
parts and services for injection molding and blow molding supplied from
Europe) Sales rose to $44 million from $34 million a year ago, with
currency translation accounting for about half the gain. New orders,
however, fell to $43 million from $47 million, despite comparable
currency effects. Volume gains and other cost savings, including
restructuring measures, helped narrow the operating loss to $0.4 million
compared to $1.2 million a year ago. The segment is expected to return
to profitability and post solid sales and earnings growth in the second
quarter.
Mold Technologies (mold bases and related parts and
services, as well as maintenance, repair and operating supplies for
injection molding worldwide) Sales in the quarter were $38 million,
even with those in the year-ago quarter, despite $2 million in favorable
currency effects. Operating earnings improved slightly to $0.5 million
from $0.3 million in 2007, as restructuring benefits and other cost
reductions offset the effects of low sales volumes. Segment earnings are
projected to show good year-over-year gains in the second quarter on
relatively flat sales.
Industrial Fluids (water-based and oil-based coolants,
lubricants and cleaners for metalcutting and metalforming operations
worldwide) Sales of $32 million were up $2 million from the year-ago
quarter due to favorable currency translation. Operating earnings were
$2.9 million. This was down from $3.3 million in the year-ago period,
which benefited from a favorable development in a product liability
case. This segment continues to expand its presence in emerging markets
and plans on posting higher sales and operating earnings in the second
quarter.
Outlook
“We expect year-over-year improvement in our
operating results throughout 2008 despite the ongoing weakness in our
North American markets,” Brown said. “We
are benefiting from the significant cost reduction initiatives we have
executed, which should generate incremental savings of approximately $20
million in 2008 over 2007. We expect these savings, combined with our
own price increases, to more than offset rising energy and material
costs. In addition, we’ll be making
increasing investments to further expand our presence in emerging
markets, which should help offset the slowdown in the U.S. Thanks to the
hard work of our dedicated people throughout the world, 2008 should be a
better year for Milacron.”
The forward-looking statements above by their nature involve risks
and uncertainties that could significantly impact operations, markets,
products and expected results. For further information please
refer to the Cautionary Statement included in the company’s
most recent Form 10-K on file with the Securities and Exchange
Commission.
Investor Conference Call
Today at 1 p.m. EDT, Milacron will hold an open investor conference
call, which can be accessed live at www.milacron.com.
The dial-in number for those interested in asking questions is
719-325-4880 or toll-free 877-591-4956. A recording of the conference
call will be available starting 4:00 p.m. on May 6 through midnight May
19 on the company’s website or by
phone: 719-457-0820 or toll-free 888-203-1112 and providing the access
code: 4679085.
First incorporated in 1884, Milacron is a leading global supplier of
plastics-processing technologies and industrial fluids with major
manufacturing facilities in North America, Europe and Asia. For further
information, visit www.milacron.com
or call the toll-free investor line: 800-909-MILA (800-909-6452).
Milacron Inc. and Subsidiaries
First Quarter 2008
Three Months Ended
March 31,
2008
2007
Sales
$ 202,795,000
$ 190,302,000
Loss from continuing operations
(6,864,000
)
(10,663,000
)
Per Share
Basic
(1.76
)
(2.66
)
Diluted
(1.76
)
(2.66
)
Loss from discontinued operations
-
(130,000
)
Per Share
Basic
-
(0.02
)
Diluted
-
(0.02
)
Net loss
(6,864,000
)
(10,793,000
)
Per Share
Basic
(1.76
)
(2.68
)
Diluted
(1.76
)
(2.68
)
Common shares
Weighted average outstanding for basic EPS
5,227,000
4,897,000
Weighted average outstanding for diluted EPS
5,227,000
4,897,000
Outstanding at quarter end
5,493,000
5,575,000
Notes:
These statements are unaudited and subject to year-end adjustments.
The common share amounts, including the weighted average
outstanding shares upon which per-share amounts are based, include
the effect for the one-for-ten reverse stock split that became
effective on May 16, 2007.
Per-share amounts include accruals for preferred dividends and the
effect of a beneficial conversion feature.
Consolidated Earnings
Milacron Inc. and Subsidiaries
First Quarter 2008
(In millions, except per-share data)
Three Months Ended
March 31,
2008
2007
Sales
$ 202.8
$ 190.3
Cost of products sold
164.2
154.8
Manufacturing margins
38.6
35.5
Percent of sales
19.0
%
18.7
%
Other costs and expenses
Selling and administrative
36.0
35.3
Restructuring costs
0.6
2.4
Other expense (income) - net
0.5
(0.2
)
Total other costs and expenses
37.1
37.5
Operating earnings (loss)
1.5
(2.0
)
Interest expense - net
(8.0
)
(7.7
)
Loss from continuing operations before income taxes
(6.5
)
(9.7
)
Provision for income taxes
0.4
1.0
Loss from continuing operations
(6.9
)
(10.7
)
Discontinued operations - net of income taxes (a)
-
(0.1
)
Net loss
$ (6.9
)
$ (10.8
)
Loss per common share - basic and diluted
Continuing operations
$ (1.76
)
$ (2.66
)
Discontinued operations
-
(0.02
)
Net loss
$ (1.76
)
$ (2.68
)
(a) In 2007, represents adjustments of reserves related to prior
divestitures.
Notes:
These statements are unaudited and subject to year-end adjustments.
The weighted average outstanding shares upon which per-share
amounts are based include the effect for the one-for-ten reverse
stock split that became effective on May 16, 2007.
Per-share amounts include accruals for preferred dividends and
effect of beneficial conversion feature.
Consolidated Balance Sheets
Milacron Inc. and Subsidiaries
First Quarter 2008
(In millions)
March 31,
March 31,
2008
2007
Assets
Cash and cash equivalents
$ 36.8
$ 34.5
Notes and accounts receivable-net
133.4
109.3
Inventories
193.4
171.6
Other current assets
34.0
43.0
Total current assets
397.6
358.4
Property, plant and equipment - net
109.9
112.5
Goodwill
93.5
87.7
Other noncurrent assets
39.5
82.2
Total assets
$ 640.5
$ 640.8
Liabilities and shareholders' deficit
Short-term borrowings and long-term debt due within one year
$ 30.6
$ 32.1
Trade accounts payable and advance billings and deposits
121.5
94.4
Accrued and other current liabilities
87.8
82.0
Total current liabilities
239.9
208.5
Long-term accrued liabilities
196.6
228.5
Long-term debt
246.8
232.6
Shareholders' deficit
(42.8
)
(28.8
)
Total liabilities and shareholders' deficit
$ 640.5
$ 640.8
Note: These statements are unaudited and subject to year-end
adjustments.
Consolidated Cash Flows
Milacron Inc. and Subsidiaries
First Quarter 2008
(In millions)
Three Months Ended
March 31,
2008
2007
Increase (decrease) in cash and cash equivalents
Operating activities cash flows
Net loss
$ (6.9
)
$ (10.8
)
Discontinued operations - net of income taxes
-
0.1
Depreciation and amortization
3.6
4.0
Restructuring costs
0.2
0.3
Working capital changes
Notes and accounts receivable
(14.4
)
4.9
Inventories
(7.0
)
(0.3
)
Other current assets
2.7
(0.7
)
Trade accounts payable
(4.9
)
(8.1
)
Other current liabilities
6.7
(1.1
)
Deferred income taxes and other - net
0.9
5.0
Net cash used by operating activities
(19.1
)
(6.7
)
Investing activities cash flows
Capital expenditures
(2.6
)
(1.6
)
Net disposals of property, plant and equipment
-
0.1
Net cash used by investing activities
(2.6
)
(1.5
)
Financing activities cash flows
Issuance (repayments) of long-term debt
14.5
(0.2
)
Increase in short-term borrowings
1.2
4.3
Dividends paid
(0.1
)
(0.1
)
Net cash provided by financing activities
15.6
4.0
Effect of exchange rate fluctuations on cash and cash
equivalents
2.1
0.2
Decrease in cash and cash equivalents
(4.0
)
(4.0
)
Cash and cash equivalents at beginning of period
40.8
38.5
Cash and cash equivalents at end of period
$ 36.8
$ 34.5
Note: These statements are unaudited and subject to year-end
adjustments.
Segment and Supplemental Information
Milacron Inc. and Subsidiaries
First Quarter 2008
(In millions)
Three Months Ended
March 31,
2008
2007
Machinery technologies North America
Sales
$ 92.4
$ 91.1
Operating cash flow (a)
4.1
3.4
Segment earnings
2.8
1.8
Percent of sales
3.0
%
2.0
%
New orders
93.9
97.9
Machinery technologies Europe
Sales
$ 44.0
$ 34.4
Operating cash flow (a)
0.5
(0.2
)
Segment loss
(0.4
)
(1.2
)
Percent of sales
-0.9
%
-3.5
%
New orders
42.6
46.6
Mold technologies
Sales
$ 38.0
$ 37.9
Operating cash flow (a)
1.3
1.4
Segment earnings
0.5
0.3
Percent of sales
1.3
%
0.8
%
New orders
37.8
36.7
Eliminations
Sales
$ (3.1
)
$ (2.8
)
New orders
(2.9
)
(2.8
)
Total plastics technologies
Sales
$ 171.3
$ 160.6
Operating cash flow (a)
5.9
4.6
Segment earnings
2.9
0.9
Percent of sales
1.7
%
0.6
%
New orders
171.4
178.4
Industrial fluids
Sales
$ 31.5
$ 29.7
Operating cash flow (a)
3.3
3.6
Segment earnings
2.9
3.3
Percent of sales
9.2
%
11.1
%
New orders
31.4
29.7
Total continuing operations
Sales
$ 202.8
$ 190.3
Operating cash flow (a)
5.7
4.4
Segment earnings
5.8
4.2
Restructuring costs
(0.6
)
(2.4
)
Corporate expenses
(3.5
)
(3.7
)
Other unallocated expenses
(0.2
)
(0.1
)
Operating earnings (loss)
1.5
(2.0
)
Percent of sales
0.7
%
-1.1
%
New orders
202.8
208.1
Ending backlog
134.1
126.6
(a) Represents EBITDA (earnings before interest, income taxes,
depreciation and amortization) before restructuring costs.
Note: These statements are unaudited and subject to year-end
adjustments.
Reconciliation of Earnings to Operating Cash Flows
Milacron Inc. and Subsidiaries
First Quarter 2008
(In millions)
Three Months Ended
March 31,
2008
2007
Machinery technologies North America
Segment earnings
$ 2.8
$ 1.8
Depreciation and amortization
1.3
1.6
Operating cash flow
4.1
3.4
Machinery technologies Europe
Segment loss
$ (0.4
)
$ (1.2
)
Depreciation and amortization
0.9
1.0
Operating cash flow
0.5
(0.2
)
Mold technologies
Segment earnings
$ 0.5
$ 0.3
Depreciation and amortization
0.8
1.1
Operating cash flow
1.3
1.4
Total plastics technologies
Segment earnings
$ 2.9
$ 0.9
Depreciation and amortization
3.0
3.7
Operating cash flow
5.9
4.6
Industrial fluids
Segment earnings
$ 2.9
$ 3.3
Depreciation and amortization
0.4
0.3
Operating cash flow
3.3
3.6
Total continuing operations
Net loss
$ (6.9
)
$ (10.8
)
Discontinued operations - net of income taxes (a)
-
0.1
Provision for income taxes
0.4
1.0
Interest expense - net
8.0
7.7
Restructuring costs
0.6
2.4
Depreciation and amortization
3.6
4.0
Operating cash flow
$ 5.7
$ 4.4
(a) In 2007, represents adjustments of reserves related to prior
divestitures.
Note: These statements are unaudited and subject to year-end
adjustments.
Historical Information
(In millions, except per-share data)
2007
2008
Qtr 1
Qtr 2
Qtr 3
Qtr 4
Year
Qtr 1
Sales
$ 190.3
$ 197.3
$ 203.7
$ 216.6
$ 807.9
$ 202.8
Cost of products sold
154.8
158.6
163.5
168.0
644.9
164.2
Cost of products sold related to restructuring
-
-
-
0.2
0.2
-
Total cost of products sold
154.8
158.6
163.5
168.2
645.1
164.2
Manufacturing margins
35.5
38.7
40.2
48.4
162.8
38.6
Other costs and expenses
Selling and administrative
35.3
34.9
35.1
39.3
144.6
36.0
Restructuring costs (a)
2.4
1.5
1.2
7.2
12.3
0.6
Change in preferred stock ownership costs
-
-
0.5
1.4
1.9
-
Pension plan curtailment cost
-
-
-
1.9
1.9
-
Other - net
(0.2
)
(0.3
)
0.4
(2.6
)
(2.7
)
0.5
Total other costs and expenses
37.5
36.1
37.2
47.2
158.0
37.1
Operating earnings (loss)
(2.0
)
2.6
3.0
1.2
4.8
1.5
Interest expense - net
(7.7
)
(7.9
)
(8.0
)
(7.8
)
(31.4
)
(8.0
)
Loss from continuing operations before income taxes
(9.7
)
(5.3
)
(5.0
)
(6.6
)
(26.6
)
(6.5
)
Provision (benefit) from income taxes (b)
1.0
(4.9
)
(0.5
)
66.1
61.7
0.4
Loss from continuing operations
(10.7
)
(0.4
)
(4.5
)
(72.7
)
(88.3
)
(6.9
)
Discontinued operations - net of income taxes (c)
Net gain on divestitures
(0.1
)
0.3
-
1.0
1.2
-
Total discontinued operations
(0.1
)
0.3
-
1.0
1.2
-
Net loss
$ (10.8
)
$ (0.1
)
$ (4.5
)
$ (71.7
)
$ (87.1
)
$ (6.9
)
Earnings (loss) per common share
Basic
Continuing operations
$ (2.66
)
$ (0.55
)
$ (1.36
)
$ (14.52
)
$ (19.48
)
$ (1.76
)
Discontinued operations
(0.02
)
0.05
-
0.20
0.23
-
Net loss
$ (2.68
)
$ (0.50
)
$ (1.36
)
$ (14.32
)
$ (19.25
)
$ (1.76
)
Diluted
Continuing operations
$ (2.66
)
$ (0.55
)
$ (1.36
)
$ (14.52
)
$ (19.48
)
$ (1.76
)
Discontinued operations
(0.02
)
0.05
-
0.20
0.23
-
Net loss
$ (2.68
)
$ (0.50
)
$ (1.36
)
$ (14.32
)
$ (19.25
)
$ (1.76
)
(a) In 2007 and 2008, represents costs related to the
consolidation of the global mold technologies and plastics
machinery businesses to reduce their cost structures and improve
customer service.
(b) In 2007, includes a $63 million non-cash charge associated
with the change in ownership of a majority of the company's Series
B Preferred Stock, as announced in October, 2007
(c) All years, represents adjustments of reserves related to prior
divestitures.
Notes:
These statements are unaudited and subject to year-end adjustments.
The weighted average outstanding shares upon which per-share
amounts are based include the effect for the one-for-ten reverse
stock split that became effective on May 16, 2007.
Per-share amounts include accruals for preferred dividends and
effect of beneficial conversion feature.
Historical Segment and Supplemental Information
(In Millions)
2007
2008
Qtr 1
Qtr 2
Qtr 3
Qtr 4
Year
Qtr 1
Machinery technologies North America
Sales
$ 91.1
$ 91.5
$ 92.9
$ 91.5
$ 367.0
$ 92.4
Operating cash flow (a)
3.4
6.5
5.1
1.6
16.6
4.1
Segment earnings
1.8
4.9
3.8
0.3
10.8
2.8
New orders
97.9
90.1
91.4
98.8
378.2
93.9
Machinery technologies Europe
Sales
$ 34.4
$ 40.2
$ 45.5
$ 60.4
$ 180.5
$ 44.0
Operating cash flow (a)
(0.2
)
1.2
1.8
4.5
7.3
0.5
Segment earnings (loss)
(1.2
)
0.3
0.9
3.3
3.3
(0.4
)
New orders
46.6
45.1
46.3
50.5
188.5
42.6
Mold technologies
Sales
$ 37.9
$ 35.8
$ 36.9
$ 37.6
$ 148.2
$ 38.0
Operating cash flow (a)
1.4
0.3
0.8
3.9
6.4
1.3
Segment earnings (loss)
0.3
(0.8
)
(0.4
)
2.8
1.9
0.5
New orders
36.7
36.5
37.4
37.2
147.8
37.8
Eliminations
Sales
$ (2.8
)
$ (2.4
)
$ (2.4
)
$ (4.2
)
$ (11.8
)
$ (3.1
)
New orders
(2.8
)
(2.1
)
(3.4
)
(4.6
)
(12.9
)
(2.9
)
Total plastics technologies
Sales
$ 160.6
$ 165.1
$ 172.9
$ 185.3
$ 683.9
$ 171.3
Operating cash flow (a)
4.6
8.0
7.7
10.0
30.3
5.9
Segment earnings
0.9
4.4
4.3
6.4
16.0
2.9
New orders
178.4
169.6
171.7
181.9
701.6
171.4
Industrial fluids
Sales
$ 29.7
$ 32.2
$ 30.8
$ 31.3
$ 124.0
$ 31.5
Operating cash flow (a)
3.6
3.6
4.0
7.0
18.2
3.3
Segment earnings
3.3
3.2
3.5
6.6
16.6
2.9
New orders
29.7
32.2
30.8
31.3
124.0
31.4
Total continuing operations
Sales
$ 190.3
$ 197.3
$ 203.7
$ 216.6
$ 807.9
$ 202.8
Operating cash flow (a)
4.4
8.2
8.6
16.0
37.2
5.7
Segment earnings
4.2
7.6
7.8
13.0
32.6
5.8
Restructuring costs (b)
(2.4
)
(1.5
)
(1.2
)
(7.4
)
(12.5
)
(0.6
)
Change in preferred stock ownership costs
-
-
(0.5
)
(1.4
)
(1.9
)
-
Pension plan curtailment cost
-
-
-
(1.9
)
(1.9
)
-
Corporate expenses
(3.7
)
(3.4
)
(3.0
)
(1.0
)
(11.1
)
(3.5
)
Other unallocated expenses
(0.1
)
(0.1
)
(0.1
)
(0.1
)
(0.4
)
(0.2
)
Operating earnings (loss)
(2.0
)
2.6
3.0
1.2
4.8
1.5
Percent of sales
-1.1
%
1.3
%
1.5
%
0.6
%
0.6
%
0.7
%
New orders
208.1
201.8
202.5
213.2
825.6
202.8
Ending backlog
126.6
132.1
131.2
129.1
129.1
134.1
(a) Represents EBITDA (earnings before interest, income taxes,
depreciation and amortization) before restructuring costs.
(b) In 2007 and 2008, represents costs related to the
consolidation of the global mold technologies and plastics
machinery businesses to reduce their cost structures and improve
customer service.
Note: These statements are unaudited and subject to year-end
adjustments.
Updated: May 6, 2008
Note: The amounts below are approximate working estimates,
around which an even wider range of numbers could be used for
financial modeling purposes. These estimates, by their nature,
involve a great number of risks and uncertainties. Actual results
may differ as these risks and uncertainties could significantly
impact the company's markets, products, and operations. For
further information please refer to the Cautionary Statement
included in Item 2 of the company's most recent Form 10-K on file
with the Securities and Exchange Commission.
Quarter Ended
(In millions)
June 30, 2008
Projected profit & loss items
Sales (1)
$202 - 216
Total plastics technologies
170 - 181
Industrial fluids
32 - 35
Segment earnings
Total plastics technologies
5 - 8
Industrial fluids
3.5 - 4.5
Corporate expenses
3 - 4
Interest expense - net
8 - 9
Provision for income taxes
0 - 1
Restructuring costs
1 - 2
Officer retirement
2
Net earnings (loss) after tax (2)
(9.5) - (1.5)
Average shares outstanding - basic
5
Average shares outstanding - diluted
11
Earnings per share (3)
($2.25) - ($0.75)
Projected cash flow & balance sheet items
Depreciation and amortization
3 - 4
Primary working capital - decrease (4)
12 - 16
Cash pension contribution
4 - 5
Capital expenditures, net
3 - 4
Cash interest
13 - 14
Cash dividends
less than 1
Cash tax
less than 1
Cash refinancing fees
2 - 3
Cash restructuring
1 - 2
1
Quarter ended June 30, 2008 increased approximately $13 million
over the same period a year ago due to the strengthening of the
Euro.
2
Includes $0.6 million of non-cash expense related to the U.S.
defined benefit plan in quarter ended June 30, 2008.
3
Per share amounts include accruals for preferred dividends and
effect of beneficial conversion feature.
4
Inventory + receivables - trade payables - advance billings
Comments & explanations
Assumes quarter ended March 31, 2008 foreign exchange rates (e.g.,
USD/EUR = 1.58480), and no further acquisitions or divestitures.